Investing.com -- Evercore ISI added Lowe’s (NYSE:LOW) to its tactical outperform list ahead of the company’s fourth-quarter earnings on February 26, given a potential upside in case it reaffirms its 1% comparable sales growth outlook from December’s analyst day.
The brokerage believes such guidance would be well received amid concerns over higher interest rates, weak pending home sales, and broader macroeconomic uncertainties.
Lowe’s has lagged behind peers this year, gaining only about 1.5% year-to-date, trailing Home Depot (NYSE:HD) and Sherwin-Williams (NYSE:SHW) by up to 300 basis points and had been underperforming the S&P 500 by roughly 250 basis points.
Evercore sees potential for the stock to benefit from market share gains in appliances and reaffirmation of full-year guidance.
The firm remains cautious on risks, noting that if Lowe’s signals further macro uncertainty or moves toward a bearish -2% full-year comparable sales forecast, investor confidence in a "rolling recovery" could be shaken. Home Depot also set to report earnings on February 25, which may also add another layer of uncertainty ahead of Lowe’s report.
"We believe expectations have come down enough for the risk to tilt towards the upside on the stock, especially while trading at just 20x while other home improvement and home related retailers have outperformed LOW and the market YTD," analyst said.
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